Finding smart policy on tech monopolies

Governments are battleships, and lawsuits can be wars. They move slowly, far more slowly than tech competition does.
Written by Dana Blankenhorn, Inactive

Fighting monopolies can be all hell.

Why else would America's preeminent tool for breaking them up, the 1890 Sherman Anti-Trust Act, be fathered by the brother of Civil War General William Tecumseh Sherman? (Picture from the U.S. Senate.)

Fighting tech monopolies is especially hard, for tech companies are persistent profitable, and move quickly. The government's antitrust struggle with IBM lasted nearly 30 years. A new action may be on the horizon.

The 1984 Bell break-up was counted as a success, but today telephony is more concentrated than ever. And who can forget the great Microsoft anti-trust case -- perhaps only Monica Lewinsky provided journalists so much entertainment during the last decade.

It is against this backdrop that we consider the latest monopoly action, a European Union fine that took Intel from profit to loss during its last quarter. Investors were untroubled. The fine went into the stock price within a day of the earnings announcement.

This might be because Intel's monopoly, assuming it has one, is a natural product of Moore's Law. More precisely its corollary, Moore's Second Law, which holds that as chip complexity increases so does the investment needed to make them. At such huge capital levels we can't afford a lot of competition.

Then there are monopolies like Apple's iPod, iPhone and App Store. Is it natural, like Intel's monopoly, or temporary, like Microsoft's dominance of office software?

The answer to the question may come down to ease of entry. Is it possible to write and distribute another Office suite? (Yes, if you're willing to give it away.) Can someone else design an iPhone-like device and app store, perhaps with a different business model, and find success? Google is certainly trying. So, for that matter, are RIM, Microsoft and Nokia.

When competition is moving in Internet Time, monopolies can appear and disappear faster than you can ask whether they have a Clue. Wasn't it just a few years ago that we all thought MySpace would dominate social networking? Uh, never mind.

Governments are battleships, and lawsuits can be wars. They move slowly, far more slowly than tech competition does. I personally believe that. while the U.S. did not ultimately break-up Microsoft its suit put a burden on the company that slowed it down considerably, and continues to hobble it.

So while I consider myself an antitrust hawk I have learned that in technology the best policy may be that many doctors apply to prostate cancer. Watchful waiting.

This post was originally published on Smartplanet.com

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